Clearing up some Misconceptions re: Debt Ceiling

Two main points in around 7 minutes (with around 12 jokes) is too-long-didn’t-watch for ya…

a). The U.S. already reached the debt limit back on May 16th. Aug 2nd is when we run out of trick to make it look like we didn’t.

b). The “debt limit” is not the same as “the debt”. Nor or either of them like your family budget, unless there are laws out there prohibiting your family from having as much debt as you do income (our country currently does not, but it does have an artificial limit (not tied to inflation) on how much we can borrow.)

We also have assets worth several times our country’s annual income, which is about $14.12 trillion/yr (2009). Note: that is the country’s income en total. The government pulled in about $2.1T/yr, and spent about $3.1T/yr in 2009.

This was Obama’s first year. In 2008, government revenue was $2.6T and spending was $2.9T. Did you notice that $500,000,000,000 ($.5T) dropoff in government revenue from 2008 to 2009? That’s what we call a recession. Except it hits government revenue waaaaay harder than the economy as a whole. The Economy as a whole was in a recession, and dropped by $250,000,000,000 ($.25T) from 2008 to 2009.

This is why it was called “The Great Recession”. Over 250 Billion dollars…gone. And it kept going into 2010. We won’t have the final 2010 numbers for a bit yet, but before we started to see growth near the end of last year, but it was really rough. The thing about losing GPD growth, and why losing $.25T in GPD led to losing $.5T (double) in tax revenue, is that we only tax profits. If a business loses money, it pays no taxes. If you lose your job, you pay no income taxes (yes, 9.2%…at least…of that oft-and-wrong-cited 47%-who-pay-no-taxes are the unemployed).

So we get a massive drop off in revenue, and huge deficits. They come pretty naturally with a recession…ESPECIALLY, if you were already running huge deficits to pay for a couple wars, expanded medical coverage (Med Part D), and tax cuts. Which brings us to this legislative fiction known as the debt limit.

It has to be raised. We’ve known for some time it has to be raised. This has been known, definitively, since December when the President gave in to the hostage takers the first time.

We can deal with the debt much, much easier after the recovery. Recall..cutting government spending = cutting government jobs = higher unemployment. If we try to balance this whole thing without *any* new debt, and just cut off a major sector of our economy, and only pay the interest on our debt, we are well and truly fucked. Which is what led to this rant below.

I think we have less than a week for a deal. And a sane deal, at that.